CHINA
YEAR OF THE
DRAGON
Nine months ago I walked out of Beijing Airport into the heady mix of sunshine, humidity and pollution, excited – but worried – about what lay before me. My training contract had been deferred for 12 months, and I had put a great deal of thought into the best course of action for the year ahead. I had certain criteria: I wanted to enjoy myself, but I also wanted to do something that would benefit my career in the long-run, and that would make me stand out. So I decided to look east. I’d spent a year in China after university, teaching English and using my long holidays to travel the length and breadth of the fascinating country. I had also learnt a smattering of Mandarin along the way (the usual – enough to order a beer, take a taxi and ensure I didn’t get ripped off
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When Nicholas Buckland’s training contract was deferred, he decided to head for China to study Mandarin and gain some legal experience. It proved a rewarding – if sometimes bemusing – adventure at the market). But this time I had very different priorities. I wanted to become fluent in Mandarin and gain experience at a Chinese law firm. Within 10 days I’d enrolled on a fulltime course at a Chinese university, booked a flight, grabbed my passport and left. I informed my firm, Field Fisher Waterhouse, and they were extremely supportive, maintaining that it was my year out to do with as I wished. I was
pleased to receive an email from the managing partner wishing me luck. I spent six months studying Mandarin, reaching a level acceptable enough to approach a contact I had in a local consulting company and ask whether he knew any law firms I could gain some legal work experience with. He put me in touch with King & Wood, one of China’s largest and most prestigious law firms. After somehow navigating my way www.legalweek.com/students
through an interview in Mandarin (a terrifying experience in itself; imagine the usual worries about a training contract interview and then add the worry that you’ll have absolutely no idea what the interviewing partner is saying), I found myself walking into the office on my first day. I immediately felt out of my depth, particularly as my IT training consisted of a whirlwind tour of the Mandarin-language version of Microsoft Outlook. Then my secretary (whom I very rarely used, being too scared to ever ask her anything) came in and barked: “Nick, kai hui!” (meeting). Seeing the anguished expression on my face at the thought of having a meeting with the partners in Chinese, she assumed that my language ability wasn’t up to much, and started repeating the phrase over and over, a little www.legalweek.com/students
bit louder and a little bit slower each time, until I motioned that I understood. Lunchtime was a novel experience – no over-priced focaccias here. We paid six yuan (about 30p) a day to eat in the basement canteen. The food was delicious and it helped that the dinner ladies were always extra kind to the only Westerner. All the associates ate their lunch together, which led to a real collegiate atmosphere in the office and gave me a great chance to
All the associates ate their lunch together, which led to a real collegiate atmosphere in the office and gave me a great chance to practice my colloquial Mandarin
practice my colloquial Mandarin every day. As I was on work experience, I was able to choose my own workload, selecting matters that were of interest and useful to me personally, as opposed to having to take on work for a certain partner. Many of my tasks, unsurprisingly considering the amount of money flowing into China from abroad, concerned foreign direct investment, which involved advising foreign clients on Chinese regulations relating to acquisition finance. I was also able to gain experience from other departments such as the firm’s IP litigation and dispute resolution practices, including working on a particularly interesting crossborder dispute between a Chinese firm and a US firm over a breach of contract and trademark infringement, which taught Continued on page 12
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CHINA Continued from page 11 me much about the Chinese attitude to contracts. It is well known that the Chinese traditionally eschew contracts, maintaining that trust is paramount in any deal, and that any breach would result in the heaviest punishment of all: the loss of face and standing in the business community. When Chinese and Western businesses contract, details can be a bone of contention, the Western side appearing to Chinese eyes as though it is untrusting. This was demonstrated when a Chinese client called on a Western client to sign some very one-sided contractual arrangements on a Mandarin contract, with the English version “to follow later”. The Chinese maintained the important thing wasn’t what was in the contract, but that the two parties trusted each other. The Americans were unsurprisingly suspicious, had the document translated and instructed King & Wood to litigate. This experience taught me not only about
Working on a cross-border dispute between a Chinese firm and a US firm at King & Wood taught me that the Chinese traditionally eschew contracts, maintaining that any breach would be punished by a loss of face and standing in the business community how businesses from different cultures can sometimes clash, but also how international lawyers must be aware of and sympathetic to the unique cultural exigencies of their clients. I was taken out to lunch on many occasions, the only downside of this treat being having to listen to the partners’ choice of music in the car (the Chinese are great at many things, but pop music isn’t one of them). I was also invited to join the weekly badminton group, chalking up one of the major achievements of my work experience – giving the hitherto
unbeatable senior partner the runaround on court, impressing him so much he treated me to dinner afterwards. I was also invited on the firm’s annual trip around southern China. Even though I was only with the firm temporarily, I was made to feel a real part of the team. Having returned to the UK, and with time to reflect on my Chinese experience, I don’t know what I was worried about. Returning to China was one of the best things I could have done during my deferred 12 months. I am now proficient in one of the most challenging, yet most widely spoken, languages in the world. I also understand the needs of Chinese clients, and the complex interaction between traditional Chinese culture and modern business practices. And I know exactly how to play badminton against a Chinese senior partner without having to worry about the dreaded ‘loss of face’. Nicholas Buckland is a trainee solicitor at Field Fisher Waterhouse.
A TASTE OF THE ORIENT LEGAL INTERNSHIPS IN CHINA “As the ‘Chinese way of doing things’ becomes internationally prominent, interest in internships in China has risen exponentially,” says Jamie Bettles, manager at Intern China, a business that finds UK students and graduates internships in the country. “The number of interns we take on is rising by around 25% year-on-year. As companies and universities realise that China has a huge role to play in international affairs, gaining practical experience of how Chinese companies conduct business is vital. Work for a foreign legal intern varies – from researching regulations in different jurisdictions, to attending meetings and seminars with clients, and producing presentations to partners about the legal system in their home country. Many people are wary about the difference in language and culture, but Mandarin ability is most certainly not a prerequisite. In fact, many Chinese companies prefer someone without language ability, as this allows them to improve their own language level by working with the intern solely in English.”
THE CHINESE LAW FIRM’S VIEW King & Wood is one of the largest firms in mainland China, and has offices in Tokyo, New York and Silicon Valley. Encouraging Westerners to intern and work there is a key part of its international strategy. Alan Zhang, King & Wood senior partner, says: “Foreign interns are a great asset in helping us understand our foreign clients, not only in terms of language but also in terms of culture and business etiquette. As the world becomes smaller and law becomes international, having a grasp of this is vital, both at an individual and firmwide level. Work experience placements for foreigners are a great way for both the firm to learn about the West, and the prospective Western lawyer to learn
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about how Chinese law and business function, particularly as China becomes more and more prominent in the world economy.”
THE UK LAW FIRM’S VIEW “We are delighted when our junior lawyers show an interest in China,” says Field Fisher Waterhouse partner Andrew Lafferty, who is in charge of Chinese development at the
firm. “We have a long history of working with Chinese clients and established close links with Chinese firms over 20 years ago. It was evident even then that China would quickly become the global player it is today. “As we carry out more work for Chinese clients, people with an understanding of Chinese language and business culture enable us to serve them better.” www.legalweek.com/students
LEGAL REVOLUTION The rise of Chinese law firms is remarkable given that just 30 years ago they didn’t exist. The Chinese Cultural Revolution between 1966 and 1976 saw all of the country’s law firms and law schools shut down. Estimates put the number of lawyers in China during this time at around 200, predominantly working in civil servant roles – an incredibly small number for a nation with well over a billion inhabitants. Jones Day counsel Owen Nee, who co-founded the first international law firm office in China for Coudert Brothers in Beijing in 1979 – operating semi-officially out of a suite in The Peking Hotel – recalls what it was like back then: “There were no Chinese law firms or law schools and almost no lawyers, just remnants of what was left over from before the Cultural Revolution. To get a visa we did a deal with the Beijing Municipal Government that saw us teach a course on international trade law in the morning, then in the afternoon we’d go back to the hotel and www.legalweek.com/students
Law firms in China have come along way in the last few years as the country increasingly opens up to foreign investment. Alex Aldridge charts the changes in the country’s legal landscape practise law. The authorities, who were tentatively enthusiastic about encouraging foreign investment, were happy to turn a blind eye.” In 1982 a new state constitution permitting the founding of state law firms gave rise to the establishment of a handful of outfits as extensions of government departments. Then towards the end of the decade another change in the constitution permitted private law firms to open up, leading some lawyers from the state firms to establish the current first-tier of Chinese law firms such as Jun He (founded in 1989), Commerce & Finance Law Offices (1992), Deheng Law Office (1993), King & Wood (1993), Haiwen & Partners (1993) and Fangda Partners (1993).
“It was an absolutely different era,” recalls Adam Li, co-founder of Fangda Partners and now a partner at Jun He specialising in international M&A and capital markets work, where he arrived following a stint with Cleary Gottlieb Steen & Hamilton in New York. “At the time David Dali Liu [also a partner at Jun He] and I were the only two lawyers in Shanghai with graduate degrees. Now you can’t get a job without one,” he adds. With commercial agreements in China still extremely basic at this stage and the scope of practice limited to a few core areas, China’s law firms in this first incarnation were staffed by generalist lawyers working independently of each Continued on page 14
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CHINA Continued from page 13 other in a style sometimes compared to UK barristers. Their Spartan offices closely resembled the government departments in which these firms had their roots. Veteran China-based Western lawyers recall the Chinese firms’ “poorly furnished buildings” and the “scruffy, civil servant-style clothing” of the lawyers of the day. But the opening up of China to foreign investment – which in 1992 saw international law firms granted permission to set up in China officially (although not permitted to practise Chinese law) – marked the beginning of a process that would see the country’s domestic firms evolve dramatically. “When China opened up it didn’t have a credible legal community, so for foreign direct investment and large-scale fundraising, international law firms filled the void,” recalls King & Wood’s Rupert Li, who worked under Nee at Coudert Brothers. “But Chinese firms quickly became an indispensable intermediary, interfacing with not only the international law firms but international investment banks. Basically what you had was a nascent profession that just happened to be dropped into the extremely fast-moving process of international fundraising, with a consequent huge transfer of knowledge taking place.” Before long the top Chinese law firms had moved to smart new offices in the buildings springing up in the centres of Beijing and Shanghai, their lawyers
now clad in designer suits. Meanwhile, firms’ structures evolved to increasingly resemble those of their international peers – albeit via lockstep pay models characterised by heavy elements of ‘eat what you kill’ payouts for the bestconnected business generators. And they have been growing at a startling rate. In 2005 Jun He had around 150 lawyers; it now boasts around 400 working out of offices in Beijing, Shanghai, Shenzhen, Dalian, Haikou, Hong Kong and New York. There has been similar growth at King & Wood, which now employs over 800 lawyers across 16 offices. Statistics on Chinese firms’ revenues are notoriously hard to come by, but they are said to have risen annually by double-digit percentage rates until the global financial crisis slowed inbound investment into China in 2008. Last year the leading Chinese practices are believed to have turned over between YUAN300m-YUAN400m (£30m-£40m) and YUAN1bn (£101m). And some firms have bucked the slowdown altogether, with Dacheng Law Offices reportedly doubling its revenue between 2008 and
Before long the top Chinese law firms had moved to smart new offices in the buildings springing up in the centres of Beijing and Shanghai, their lawyers now clad in designer suits
2009. Despite possessing a lower profile internationally than firms like King & Wood and Jun He, the fast-growing Dacheng now has more lawyers than both, with a total of around 900 fee earners and approximately 400 partners operating out of 27 offices. Last year alone the firm opened 14 offices, the majority through the acquisition of local firms, though Dacheng is seen as having far less clout for high-end corporate work than China’s more established outfits. Salaries, meanwhile, are fast approaching Western levels, though not on par with packages available for commercial lawyers in markets like New York and London. Annual associate earnings at leading Chinese law firms start at around $15,000 (£9,00) and reach $100,000 (£63,000) plus bonuses, which can add another 40%-50%. Equity partners take home between $250,000 (£157,000) and $750,000 (£472,000) a year. Individual high flyers can earn as much as $1m-$2m (£629,000-£1.26m) after tax. Given the much lower cost of living in China, these sums go a long way. Dan Harris, a partner at Seattle-based law firm Harris & Moure and co-author of the China Law Blog, comments: “At partner level many of these guys are rolling in it, because they’re charging near-Western rates but paying Chinese costs. It is not at all uncommon for partners at China’s top law firms to own condo after condo, car after car.”
INTERNATIONAL LAW FIRMS IN CHINA While international law firms have been permitted to operate in China since 1992, under Chinese Bar rules they are not permitted to practise local law. In addition, the Chinese-qualified lawyers they employ must surrender their practising certificates, taking the role of ‘consultants’. In practice though, the restrictions are not particularly tightly policed. “Actually, the Ministry of Justice is pretty accommodating to foreign firms, enforcing the restrictions far from rigidly,” says ex- Lovells (now Hogan Lovells) Beijing managing partner Robert Lewis, now a partner at Chinese law firm AllBright. He gives an example of a meeting of international law firm managing partners and Chinese Government officials he attended four years ago while at Lovells: “I remember one managing partner of an extremely high-profile New York law firm turning to the senior Ministry of Justice official and saying, ‘You do know that if you enforced your rules properly, you’d have to kick us out’.” But there is little doubt that the ban - which lawyers say they do not expect to be lifted anytime soon - has substantially held back the near 200 foreign law firms operating in China, putting a ceiling on their ability to expand. “Foreign firms do well in China, with a business model that sees them represent international clients investing in the country and offering foreign products to Chinese corporations going
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abroad, but this restriction means there will always be an awkwardness in the way the Chinese law service is rendered,” says King & Wood partner Rupert Li. The ban has also curbed expansion outside China’s two major business centres, says Lewis. “While it has been possible for many of the foreign firms to open up a third office outside Beijing and Shanghai for almost five years now, nobody has done it - mainly because it’s an extremely hard sell to central management back in London or the US.” The result is that as Chinese firms keep growing, the international law firms with the largest presence in mainland China like Baker &
McKenzie and Clifford Chance rumble along at around the 50-100 lawyer mark, limiting their ability to provide career paths to their native Chinese lawyers. Keen to play a part in their country’s economic renaissance, these lawyers - who have been targeted by international firms in China for some years for their language skills and understanding of the way business works in the country - increasingly view Chinese law firms as the best bet for furthering their careers. “In a Chinese law firm, people like me can make partner earlier and have more flexibility in developing their own business,” says former Skadden Arps Slate Meagher & Flom associate Kirk Tong, now a partner at Jun He. www.legalweek.com/students